IMAX, CMC Capital to launch China film fund

IMAX's China subsidiary is also involved in the fund. Last year, FountainVest Partners and CMC paid $80 million for a 20% stake in the business, which is now moving forward with its Hong Kong IPO. The company made an initial filing a few weeks ago and is reportedly targeting a $300 million offering.

The IMAX China Film Fund will have up to $50 million in initial capital, although discussions are already underway with additional investors. It will target productions that can leverage the IMA brand, relationships, technology and release windows. The vehicle will support IMAX and non-IMAX content, develop original films and co-finance studio productions, committing $3-7 million per film.

Greater China is IMAX's fastest-growing market. The company opened its first theater in the country in 2011 and had a total of 239 in operation as of March 2015. It has an additional 219 theater systems in its backlog. Rather than just sell theater equipment, the company now has a revenue-sharing model with cinema operators, deferring a portion of up-front payment for a share of box office revenues.

The bulk of IMAX China's revenue comes from theater systems and related services, but it also digitally re-masters Hollywood and Chinese language films into the IMAX format. China is the world's second-largest movie market after North America and four of 2014's five highest-grossing films were released in IMAX format. However, China-language films only accounted for 15.2% of total IMAX box office sales, despite accounting for 55% of the overall market.

"For more than a decade, IMAX has strived to be and continues to work toward being a part of the Chinese entertainment ecosystem," said IMAX CEO Richard L. Gelfond, in a statement. "This fund is the next step in that evolution as it allows us to join with our good partner CMC and work closely with the country's top filmmakers to bring to Chinese audiences and to export to international audiences top-quality Mandarin content."

CMC claims to be China's first media and entertainment-focused private equity fund approved by the National Development and Reform Commission, and has a string of state-owned enterprise backers. Ruigang Li, CMC's chairman, is the former president of Shanghai Media Group.

Only 34 foreign films are allowed into China each year, including IMAX's format. Domestic distributors keep around 50% of the box office revenue. Movies produced as Sino-foreign joint ventures, with a certain amount of domestically-produced content, are not subject to this annual quota.

Private equity has seized upon this opportunity. Two China-focused film funds - Harvest Seven Stars Media Fund and China Mainstream Media - launched in 2012 with a view to supporting local productions and potentially working with overseas studios. Meanwhile, Hony Capital and TPG Capital backed start-up Hollywood studio STX Entertainment, which this year secured a financing deal with China's Huayi Brothers Media Corp. to release 12-15 movies a year by 2016.

There is also a broader push to gain exposure to China's media and entertainment industry. Last year, Singapore-based Tembusu Partners and local media entrepreneur Calvin Cheng joined forces with Yu Dong, CEO of China's Bona Film Group, to launch a media-focused fund. Taiwan's Fubon Group, Hong Kong's Media Asia and South Korean music giant SM Entertainment have a similar venture.

In addition, CMC teamed up with London-headquartered TV producer FremantleMedia and Shanghai Media Group (SMG) to create a joint venture that will develop content for the China market.

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• Topics
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• Greater China
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• Media
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• China Media Capital
• China
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